Here’s How the Dow Got to 40K. Thank Caterpillar and Goldman Sachs Stock.

amazon, microsoft, here’s how the dow got to 40k. thank caterpillar and goldman sachs stock.

The stock market was up Thursday morning and the venerable Dow Jones Industrial Average finally cracked the 40,000 barrier for the first time ever.

How did it get there? American Express and Amazon.com are the two top Dow stocks so far this year, with Amazon up nearly 25% and Amex surging almost 30%. But because of how the index is weighted, neither of these stocks is actually the biggest contributor to the Dow’s rise to the new milestone. Instead, investors should be thanking Goldman Sachs and Caterpillar.

The Dow, unlike the S&P 500 and many other indexes weighted by market value, is a price-weighted average. That means companies with the highest stock price matter most, not those with the biggest market cap. So the Dow isn’t getting as much of a pop from the Magnificent 7 as the S&P 500 is. Three key members of that revered group of tech stocks—Nvidia, Meta Platforms and Alphabet—aren’t in the Dow…yet. (Maybe those stocks will be added in the next few years to help lead the Dow to 50,000 or higher.)

Goldman Sachs accounts for a nearly 7.7% weighting in the Dow, according to data from IndexArb. Only UnitedHealth, with an 8.5% contribution, is a bigger component. But UnitedHealth shares have been a drag on the DJIA this year, falling more than 2% in 2024. Caterpillar has the fourth-largest weighting in the Dow at just under 6%.

Caterpillar has risen 21% this year while Goldman Sachs is up almost 19%. That makes them the third and fourth largest gainers, respectively, on a percentage basis. According to Dow Jones Market Data, Goldman and Caterpillar have contributed nearly 950 points to the Dow’s run-up this year through May 15.

That’s more than Amex and Amazon, which rank as just the tenth and 15th biggest Dow weightings, respectively. American Express is the third biggest point contributor to the Dow this year though, accounting for nearly 360 points of the Dow’s net gain.

It’s also worth noting that Amazon has only been in the Dow since late February, when the e-commerce and cloud-computing giant replaced Walgreens. Dow Jones Market Data said that Amazon has contributed 72 points to the Dow’s pop since its inclusion, while Walgreens was a net 29 point reduction before it was removed.

Looking at other winners and losers in the Dow this year, Microsoft and JPMorgan Chase round out the top five in terms of points added to the DJIA.

The biggest laggards? Boeing, hit hard by concerns about plane safety and recalls, is the most significant Dow dog by far. It’s had a more than 550-point reduction on the Dow in 2024. McDonald’s, Intel, Nike, and UnitedHealth are the next worst Dow performers by points. Intel’s problems aren’t really holding the Dow back, though. The chipmaker’s stock is the lowest in the DJIA, making up a mere 0.5% of the Dow’s overall weighting.

The list of outperformers and laggards looks pretty similar when looking at the past 12 months, too. Caterpillar, Goldman, Microsoft, and Amex are the top four, with Amgen in fifth. Nike, Boeing, McDonald’s, Walgreens, and Johnson & Johnson were the biggest Dow losers since mid-May 2023.

Looking even further back, Goldman Sachs deserves even more credit for the index’s climb. Since the Dow first closed above 30,000 in late November 2020, Goldman has added the most points since then on the road to 40,000, according to Dow Jones Market Data. 3M has subtracted the most points during that span.

Here’s where things get even more interesting, however. Following a tough April for the markets this year, the stock rally has resumed in May and it appears to be broadening out. Amgen is the largest contributor to the Dow’s point gains this month and UnitedHealth actually ranks third. Goldman, Microsoft, and Caterpillar round out the top five.

And Apple—which, like UNH, has been a laggard in the Dow this year, is the sixth-largest points gainer this month. Home Depot and Honeywell, two other Dow underperformers this year (HD is flat and Honeywell is down in 2024), have also rebounded in May. The recent comeback in Home Depot and Amgen is definitely having a big impact. They are the fifth- and sixth-largest Dow weightings, with each accounting for more than 5% of the price average.

Disney, which reported slightly disappointing sales earlier this month. is one of only two Dow stocks that is lower in May. Nike is the other. Luckily for investors, their struggles don’t have as big of an impact on the day-to-day moves of the index. Disney is only the 22nd-biggest Dow component, while Nike ranks 24th.

Write to Paul R. La Monica at [email protected]

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